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Price Gouging?

Discussion in 'Politics & World News' started by W4S, Oct 25, 2005.

  1. W4S

    W4S Turbo Monkey

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    I wish I could be a fly on the wall in an energy executives' office.

    BP Reports 3rd-Quarter Profit Up 34 Pct.
    Tuesday, October 25, 2005 1:39 PM EDT
    The Associated Press
    By JANE WARDELL

    LONDON (AP) — Energy group BP PLC, one of the world's largest oil companies, reported a 34 percent rise in quarterly profit Tuesday as record energy prices more than outweighed hurricane damage to its rigs and refineries.

    BP said net profit for the three months ended Sept. 30 rose to $6.53 billion, up from $4.87 billion in same period of 2004. Revenue jumped to $97.73 billion from $66.73 billion.

    Production fell 2 percent from a year ago, primarily because of hurricanes in the Gulf of Mexico. Hurricane Katrina hit in late August, temporarily shutting down at least 80 percent of Gulf crude oil and natural gas production and crippling many refineries. Hurricane Rita then followed, delaying a return to usual production.

    "The recent hurricanes in the U.S. have impacted our results. However, underlying performance is strong, amplified by high but volatile prices of oil, gas and products," said Chief Executive Lord Browne. "We anticipate production from the deepwater Gulf of Mexico to be back to normal, with the exception of the Shell-operated Mars project, by the end of the year."

    KBC Peel Hunt analyst Antoine Leurent said BP ultimately benefited from the hurricanes — and the spike in oil prices they caused — more than it suffered from the shutdowns.

    BP's badly damaged Thunder Horse platform in the Gulf is expected to start production in the second half of next year, the company said, with the costs to secure and repair the facility were $107 million for the quarter.

    The company said its Texas City refinery, which was shut down in advance of Hurricane Rita, is expected to resume production late in the fourth quarter. That refinery also was the site of an explosion and fire in March that killed 15 people and injured 170.

    Browne said the price of a barrel of Brent crude oil averaged $61.63 in the third quarter, an increase of $10 per barrel from the second quarter average, and more than $20 per barrel above the same period last year.

    Oil prices on the New York Mercantile Exchange peaked at $70.85 a barrel on Aug. 30 because of Katrina, and Browne said prices "are expected to be well supported into the winter."

    BP is the first major oil company to report results since the hurricanes, ahead of Royal Dutch Shell PLC and Exxon Mobil Corp. later this week.

    The company said its replacement cost profit for the quarter, considered a key indicator by analysts, rose 16 percent to $4.41 billion. The measure excludes exceptional items and gain in the value of inventory holdings, providing the amount it would cost to replace assets at current prices.

    The third-quarter result included a charge of $921 million, largely due to the loss of fair value on Innovene, the company's petrochemicals unit that it is selling for $9 billion to British chemical company Ineos PLC. That compared with a charge of $394 million in the year-ago period.

    Shares in BP fell 1.2 percent to close at 609 pence ($10.77) on the London Stock Exchange.
     

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  2. Changleen

    Changleen Paranoid Member

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    Capitalism :thumb: Should our respective governments be telling these companies to drop their prices?
     
  3. PsychO!1

    PsychO!1 Monkey

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    Isn't oil traded? and isn't the price dictated by the market? I'm unclear how the price per barrel is determined, but i think thats how it works.....please inform me if I'm wrong.

    If so....the current market price seems to be inline with retail prices. If you sell a product that is in RECORD demand, and you are selling at record (or near record) volumes, wouldn't you expect record profits. Who is the goverment to regulate my profits?
     
  4. ohio

    ohio The Fresno Kid

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    The oil market is an odd animal in that it's based on futures and the production is regulated by OPEC. Read up on it.

    edit: excuse me, I said "pricing" when I meant "production."
     
  5. -BB-

    -BB- I broke all the rules, but somehow still became mo

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    Yes and no...
    You have groups like OPEC that get together and collectivly dictate the "supply" side, thus giving them the ability to set prices given the unwavering demand.
    There are non-opec producers (venezuala, Russia, the US), but OPEC conrtols such a large% that the non-opec's are not nearly enough to make up for it.

    That is just part of it.
     
  6. DRB

    DRB unemployed bum

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    You would be hearing a lot of them asking did you care when oil was $10 a barrel in the late 90's and they were all losing their jobs. When exploration and production staffs were getting laid off to appease investors and the markets. I suspect no one really cared.

    You would also be hearing lots of scratching heads trying to figure out exactly how oil got to $65 (after a peak of over $70) a barrel in 18 months. And more importantly where it will be over the next five years. I can promise you that most are looking closer to $40 than they are $70. When multi BILLION dollar decision are going to be made based on these assumptions, they become more than critical.

    Even in the face of these record profits and past cuts, the oil industry still spent in excess of $175 Billion on exploration and source development.

    As for refining, where the real problem lays, the $20 per barrel profits on refining being realized now are in stark contrast to the less than $5.00 as recently as the 4th qtr 2004. I've talked about the problem with refining before. However, there are strong indications that Motiva is going to be investing heavily in expansion at least 3 Gulf refinieries.

    The one thing you won't hear from them that you'll hear from me..... thanks for the bonus.
     
  7. PsychO!1

    PsychO!1 Monkey

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    Thanks. I googled it, and at a glance didn't find anything definitive. I'll keep digging.

    It still seems to me that the oil company profits are related to demand and volumes, rather than 'price gouging'. Last I checked it wasn't illegal to run a proftable company.
    I mean the US still has pretty cheap as compared most of the world.
     
  8. DRB

    DRB unemployed bum

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    Venezuela is an OPEC nation. Russia and the US are not.
     
  9. W4S

    W4S Turbo Monkey

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    The prices are related to demand vs. supply, which is set by futures and allocation. (I think that is how it works). It seems to me that this is collusion 'lite', because companies are raising prices by 600% when production only fell 2%. Maybe we are paying for the relatively flat price of oil through the 90's, and the recession that followed, but it still seems shady.
     
  10. ohio

    ohio The Fresno Kid

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    Oil company profits are related to demand and volumes, obviously, but demand is relatively inelastic for a variety of reasons. By your definition, "price gouging" is an impossible phenomenon. It isn't illegal to run a profitable company. I haven't seen any oil companies sued for anything other than human rights violations. Have you?

    The US people have it pretty cheap, because we don't tax oil very much. The US as a nation doesn't get oil any cheaper than anyone else.
     
  11. Transcend

    Transcend My Nuts Are Flat

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    The prices are indeed determined by supply and demamd, only it is incredibly artificial. OPEC members dictate how much supply there is at any given time, in ordere to regulate prices. IE - it is utter BS.

    Technically, it is an illegal cartel and price fixing is involved (not gouging).
     
  12. sanjuro

    sanjuro Tube Smuggler

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    I don't know why people complain about oil prices. They seem reasonable to me, and if you drive a car or use electricity, you should not complain.

    DISCLOSURE: I used to work for BP, and I am still invested in the BP stock program.
     
  13. Jabuttri

    Jabuttri Monkey

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    Prices have risen in the late 90's and early 2000's due to the enormous quantity of oil that china is consuming. they will pay more for it so oil producing nations send their product there. there is less left over so we pay a higher price for what we get.
     
  14. jaydee

    jaydee Monkey

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    That would be nice, seeing as how these scumsucking multinationals make us drop our pants every time we go to the gas station.

    It would actually be much more effective if people were intelligent and coordinated enough to make the effort to use less of the stuff, but that ain't gonna happen in the land of the Hummer.
     
  15. ohio

    ohio The Fresno Kid

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    To be fair, oil companies are investing more in research and development of alternative energy sources than any other entity, and as a private institution are probably didstributing those funds more effectively and efficiently than any government or NFP board. The fact that they're raking in the profits right now is partially a convergence of fortunate events for them (although they need the spike to end before the market becomes elastic), and partially (IMO) some political handouts. If there's anyone to be angry at, it's the politicians not companies that are conducting the same business they were conducting a few years ago.

    Of course, as a pretty rabid environmentalist and someone invested in ethical sustainable development of communities, I have my issues with big oil... but that's somewhat separate from this thread.
     
  16. Transcend

    Transcend My Nuts Are Flat

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    Exatcly. I read somewhere yesterday that altho exxxon brought in gross sales of 100Bn last quarter, expenses tallied up to 90Bn. I mean 10Bn profit is nothing to sneeze at, but it isn't 100Bn.
     
  17. MMike

    MMike A fowl peckerwood.

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    Did a 6 fingered oil company man kill your father?

    "Hello. My neam is ohio. You killed my father. Prepare to die"